Three steps to make sure your compensation strategy is recruiting – and retaining – the talent you need
As employers catch on that offering better wages and benefits is necessary to attract – and recruit and retain – top talent, HR managers and employees have both gained more power to negotiate terms. But how do you know if you’re offering enough?
It starts with labour market comparison, but there is more strategy involved, according to Paula Inglis and Michalla Nolan of Mercer who share three key tips for designing competitive wage and benefits packages.
The first basic step that many HR leaders miss when designing compensation packages is determining what “competitive” means to their organization in the first place.
Three steps to competitive wages
- Establish your organization’s ideal future state
Your organization’s compensation philosophy includes who you hire, the culture you are aiming for, and how your target positioning is reflected in the market, according to Mercer.
Much like a mission statement, a compensation philosophy can be a list of the values your compensation package prioritize; for example, ‘Our compensation philosophy is to provide rewards that are:’
- fair and equitable
- able to attract, retain, and motivate the employees we need to support our business objectives
- easily communicated to and by managers and employees
- in line with our labour market competitors.
Working with this information, move forward with designing the compensation strategy, specifically documenting how each of the above values will be achieved through its implementation, recommends Mercer.
In the absence of a compensation strategy, many businesses target the labour market median, thinking it’s the safe choice. But there is no one definition of “competitive” and each company should establish its own.
- Choose the right market pricing data for your organization’s compensation package goals
Select the data to use in market comparison carefully, says Mercer. Usually this information is found in salary surveys, and knowing which and how many of these surveys can be overwhelming.
Choose data that reflects your “market comparator”, or your competition for talent recruitment. Important questions to consider: where did the employees at your organization come from, and where do they go when they leave your employment?
Using both general and industry specific data, such as the Mercer Benchmark Database (MBD), you can hone your compensation packages to be ideal for each role you are hiring for. For example, an HR generalist role might require general industry data as the ideal candidate might be from one or several industries, whereas a nurse practitioner role would require more specific healthcare industry wage data.
- Market pricing your wages to be competitive
Market pricing means comparing your compensation package to the associated market using available market data, says Mercer; using your compensation philosophy and strategy along with the data you collected from surveys, you can now determine how competitive your wages are compared to your market competitors.
There are two key ways to analyze your compensation offering against the market, says Mercer in its article.
As long as you can document your decisions, communicate them effectively, and apply your policy consistently, you’ll be set to offer competitive wages.
